Running a Restaurant Inside Your Hotel | Guide for Small Hotels

Running a Restaurant Inside Your Hotel: What Small Hotels Need to Know

Many small and medium-sized hotels dream of running a great in-house restaurant. It seems like the perfect pairing. Guests are already on-site, and there’s potential for extra revenue and brand building. But running a restaurant inside your hotel is not a simple add-on. It is its own business, with its own margins, risks, and operational complexities.

At Antravia, we have worked with independent hotels across the Caribbean and beyond. In one case, we were brought in to review the restaurant and bar performance at an all-inclusive property. We examined food cost per night, staff-to-cover ratios, breakfast wastage, beverage margin, and the relationship between occupancy and kitchen prep. The numbers told a very clear story.

This blog is for hotel owners and managers who are serious about understanding the financial side of running a restaurant — and doing it well.

Why Most Small Hotel Restaurants Struggle

Many hotel restaurants operate at a loss without even realising it. This usually happens for three reasons:

1. There is no separation between the hotel’s financials and the restaurant’s performance

2. Food cost is not tracked consistently or compared against revenue

3. Menus are based on what sounds good, not on what is profitable or operationally efficient

In smaller hotels, these issues are magnified. You may have fewer staff, inconsistent covers, and limited storage. But that doesn’t mean you can’t run a profitable restaurant. You just need to approach it like a business, not a guest amenity.

Start With Your True Food Cost Per Cover

Your food cost per guest should not be an estimate. It should be a calculation you update at least monthly. Include:

• Direct cost of ingredients

• Delivery and storage wastage

• Staff meals if not budgeted separately

• Portioning errors

• Buffet overproduction

• Packaging or takeaway costs (if applicable)

In one Caribbean all-inclusive hotel, we found that breakfast cost per guest was 3.10 USD higher than expected, due to poor portion control, low occupancy forecasts, and over-reliance on buffet setups. Multiply that over 150 guests per day, and the hotel was losing over 140,000 USD a year just at breakfast.

Even small changes in wastage, portioning, or menu design can have a big financial impact.

Breakfast Is a Cost Centre - Control It Like One

Breakfast is often viewed as a loss leader, especially when included in room rates. But that does not mean it should be unmanaged. In fact, because margins are tight, it needs the most control.

Ask yourself:

• Are we producing based on expected covers, or defaulting to full production every day?

• Are hot items being refreshed too often, leading to wastage?

• Do guests actually eat everything offered, or is the menu bloated?

• Are beverage dispensers leaking money through unmonitored use?

Hotels in warm climates often see high juice wastage. In one case, a simple switch from free-pour carafes to dispenser-controlled servings saved over 6,000 USD per year.

Track Your Average Cost Per Night for All-Inclusive Guests

For all-inclusive hotels, one of the most important metrics is the average cost per guest per night, including food, beverage, and staffing. This metric allows you to compare actual spend with revenue per night, and identify underperforming days or segments.

Your calculation should include:

• All kitchen and F&B staff wages

• All food and beverage purchases

• Utilities allocated to the kitchen

• Cleaning and linen used in F&B areas

• Maintenance of kitchen equipment

If your average food and beverage cost is 28 USD per guest per night and you are charging 35 USD as the F&B allocation, your margin is very slim. Add in beverage theft, food returns, or stock write-offs, and you are probably losing money.

Labor Is Your Hidden Cost, but also Your Opportunity

Staffing in hotel kitchens is one of the biggest variables. Too many properties carry full kitchen brigades even on quiet days. Others rotate staff too heavily, which leads to inconsistent quality and retraining costs.

You should know your:

• Kitchen labor cost as a percentage of food revenue

• Number of covers per staff member per service

• Cross-utilization rates between kitchen and bar or events

According to a 2023 survey by the National Restaurant Association, the average labor cost for full-service restaurants was around 31 percent of total revenue. Hotel restaurants often creep higher due to fluctuating occupancy. If you are at 38 percent or above, you need to review scheduling, prep processes, and whether your staffing plan is still aligned with your current guest mix.

Menu Engineering: You Can’t Just Cook What You Like

Many hotel restaurants are designed by chefs, not accountants. That can work - but only if someone is watching the numbers.

Your menu needs to balance:

• Items with high perceived value but low cost

• Cross-use of ingredients across meals to reduce wastage

• Dishes that can be batch prepped without sacrificing quality

• Items that justify a markup on presentation or uniqueness

We often recommend a “menu heat map” showing each item’s popularity, cost, and margin. This helps remove emotional attachment and keep the menu focused.

If you are offering six cuts of steak on a menu for a 50-room hotel, you are likely over-complicating things and tying up too much capital in inventory.

Beverage: Your Profit Centre, If You Let It Be

Most small hotel restaurants underestimate the power of beverage. Done right, it can subsidise losses from food or breakfast. Done poorly, it becomes a source of shrinkage, waste, and cash leakage.

You should know:

• Actual pour cost of each house wine, cocktail, and spirit

• Inventory turnover and spoilage

• Whether staff are comping drinks or undercharging

• If minibar or pool bar sales are cannibalising restaurant margins

A good beverage program can operate at a 20 to 25 percent cost of sales if managed correctly. Anything higher may mean you are leaking profit.

Separate Restaurant and Hotel P&L, Even if You Don’t Report It That Way

Even if your financial reporting is consolidated, you need to track the restaurant’s income and expenses separately.

Use a basic internal P&L that includes:

• Food and beverage revenue

• Staff costs

• Direct operating expenses

• Allocated overheads

• Average spend per guest and per cover

• Operating margin by service (breakfast, lunch, dinner)

You cannot fix what you do not track. A restaurant inside a hotel should be treated as a business unit, not an amenity.

Final Thought: Your Restaurant Can Be an Asset - But Only If It Performs

A restaurant can boost your hotel’s value, increase average daily rate, and enhance your brand. But if it is poorly run, it can quietly drain your profit and erode guest experience.

At Antravia, we help hotels restructure their F&B operations so they actually add value to the business. That means real numbers, smart staffing, profitable menus, and clear financial controls.

If you are serious about improving your hotel’s performance, start in the kitchen.